Regional trade Blocs

Regional trade Blocs

Introduction

Regional trade blocs are considered as associations of nations establish at government level to enhance trade within the block and protect its members from global competition. Global competition is putting economy several hurdles and it can be defended through proper developed tariffs on goods produced by member states, government subsidies, import quotas, technical barriers, difficult bureaucratic import processes, and other non-tariff barriers. Trade bloc has various benefits for firms and industry across its member countries. As, it is consider that trade is not a alone activity and it involve other regions economic, security, political and economic and several other issues which has affect on firms investment decisions.

The European Union is consider to one of the unique community of twenty-seven European states. It is consider to be one of the regional trade blocs. It was established on November 1, 1993, when he came into force the Treaty on European Union (TEU), being the de facto successor of the European Communities, created in 50 years of the twentieth century. Its speciality lies in its partly inter-government and supranational, which regains over maintaining unique political relations among its members that result in the creation of a single legal system, and the existence and functioning of their own institutions.

Discussion

When the Great Depression started in 1929, countries tried to get out of a serious economic slump by securing their domestic markets for domestic commodities. They restricted the amount of trade by raising tariffs and limiting the amount of imports from other countries. Such protectionist actions caused countervailing restrictive trade actions from other countries, all of which made the depression longer and deeper than it needed to be. Worst still, these actions triggered the creation of emerging blocs and “economic nationalism,” that ultimately helped pushes countries into World War II.

In this context, since the 1990s, countries have begun to make bilateral Regional Trade Agreements (RTAs) as well as multilateral ones to create alternative trade relationships without trade barriers such as tariffs and quotas. The commitment to regionalism by the United States and European Community (EC), in particular, triggered sharp increase of RTAs (Barr, Breedon and Miles 2003, 573: Baldwin 2006, 58). It was in this era in which world witnessed significant trend, particularly the developed countries, to develop regional trade blocs such as NAFTA and EU. Introduction of these trade blocs had been prompted by an emerging emphasizes on competitiveness and led to the formation of World Trade Organization.

The European Union emerged from the European coal and steel community after World War II, in 1950, by France, Italy, Germany, Netherlands, France & Luxembourg, for the revival of industries in their region, which were in staggering stage. On the practical side of theory, they had a vision that, this economic collaboration would bring an end to regions centuries' earlier history of internal disagreements. For this reason, European Economic Community, also known as Common market, created through treaty of Rome.

Implications of trading blocs for international businesses

Trade blocs, concept is of vital ...